Last week FASB Chair Russel G. Golden delivered an address to the AICPA Conference on Current SEC & PCAOB Developments . The entire speech is worth reading. We’ll hit some of the highlights.
Golden stated that the Revenue Recognition Transition Resource Group (TRG) was successful in many ways. Because TRG was a joint effort of FASB and IASB, the TRG will help achieve the goal of “global comparability in revenue recognition.” He noted that TRG has released 3 exposure drafts and published over 50 papers based on input from a wide variety of stakeholders
The Exposure Drafts and final guidance we’ve issued to improve the revenue recognition standard were intended to make improvements that will save a lot of cost without impacting the quality of information provided to investors. We’ll determine if and when to schedule additional TRG meetings based on additional issues submitted. To the extent there’s still more to do, we’ll do more.
Golden stated that FASB and IASB standards for revenue recognition “are converged in all significant areas” but there are still differences. He lists three examples, the largest of which seems to be the quarterly quantitative disclosure requirements for companies reporting under GAAP.
FASB has also created a TRG for impairment. Golden is concerned that there is a lot of misinformation floating about the new impairment standard. He states that contrary to some reports the new standards
- Do not require new systems, or for banks to do new, complex analysis.
- Will not cause bank examiners to take a more conservative view
- Need to apply to smaller community banks
- Absolutely recognize the true economics of the lending industry.
Golden also covers the issue that may end up having the largest impact on most companies. the changes to the definition of materiality. We looked at the materiality exposure draft previously and we generally urge that everyone read the entire exposure draft and comment.
Finally, he stresses again the need for the FASB board to retain political independence:
Our mission at the FASB is to set standards that accurately reflect economic transactions, and provide investors and other users of financial reports with the information they need to make decisions about how to invest their capital.
It is our duty as we work through the standard-setting process to take into account all points of view, including those of the investors and other financial statement users, as well as preparers and auditors.
Our independence from political and special interest influence is important because, in the end, we are not in the business of picking winners and losers. Our job is to set standards that promote the reporting of useful information to those who make the decisions that drive our capital markets.
